Attaining decent work and economic growth — what role does taxation play?**

There has been a lot of focus on the UN’s sustainable development goals (SDG) in recent years. There are 17 major SDGs with a total of 169 underlying targets. Rendahl and Nordblom (2020) took a broad look and analyzed the overall role for taxation to attain a more sustainable development. In doing so, they identified three basic values: (1) equity and equality, (2) environmental protection and (3) coherence. These three basic values were found to underlie most of the 17 SDGs in one way or another.

In the current paper, we concentrate on and dig deeper into SDG 8: Decent Work and Economic Growth and what role taxation may play to achieve it. The intention is thus to analyze SDG 8 in the light of the abovementioned basic values and try to understand what “decent work” really implies in terms of sustainable policies on taxation and social security for example. How do we design policies to promote productive employment that from both an economic and a legal perspective is sustainable in an increasingly global world?

A basic assumption is that taxation is integrally linked to development of the values expressed in SDG8. This means that taxation affects and sets a legal framework for how the values may be attained and understood. Tax revenues are needed for providing the type of infrastructure and services that characterize decency on the labor market. The type of tax policies chosen can incentivize (or disincentivize) investment and economic growth and also address questions of (in)equality and fairness. Taxes must be designed not only to support economic development but also to reduce inequality in the drive for inclusive growth. Promotion of economic growth and the effort to secure decent work for all do not necessarily go hand in hand, but inclusive, sustainable growth requires that the economic gains be distributed fairly and benefit the least well off. Here, taxes may play a significant role, both for redistribution and for facilitating economic growth. Although there might be a tension between policies that promote growth and others that promote equality, these two aspects are interlinked. Too much inequality will not sustain inclusive growth and poor economic growth will not provide the resources needed to generate prosperity and required tax revenues for a sustainable financing of public assets and infrastructure that in turn enhance growth. There is thus a strong coherence between the “poles” expressed in SGD 8.

Taxation is often regarded as a national concern, where the state has the power to decide how to tax its nationals and revenue deriving from activities carried out within that state.¹ As cross-border activities have increased and become easier to implement in different business models due to increased digital possibilities, relations between independent states on how to share the tax revenues have been discussed both practically and theoretically. From the practical perspective, the Base Erosion Profit Shifting (BEPS) project, initiated by the G20, is an example of an attempt to coordinate international tax policies between independent states. Theories on such a social contract between independent states have been formulated. Allison Christians has, for example, discussed this based on the work carried out within the OECD, claiming that actors such as the OECD are gradually redefining the connection of taxation to sovereignty.² She claims that states have a sovereign duty to other states under an implied social contract. Her study is based upon the OECD framework on harmful tax competition, but the theoretical basis of understanding the perspective of a social contract where the boundaries and authorities of the nation-state is challenged by global integration and interdependence as a social, institutional, and economic reality.³ The content of a social contract may, however, be analyzed and criticized depending on how it is formed, understood, and implemented. In this article, we discuss whether the social contract upholds the basic values of the SDGs as described below in Section 2.

Taxes should thus be fair, reduce inequality, and sustain economic growth. Arguably, taxation may affect the labor market as well as economic growth and there have already been tons of volumes written on these economic matters. In this paper we will instead take a sustainability angle and make the analysis from both a legal and an economic point of view when we consider the role of taxation for SDG8. The analysis is based on the four core principles that Rendahl and Nordblom (2020) identified as essential for tax policy to promote sustainability: redistributive taxation, environmental taxation, international legal cooperation, and efficient, legitimate nondiscriminatory tax law.

Analyzing the potential role for tax policy for achieving SDG 8, cannot be done in isolation. Ever since the Brundtland Commission in 1987 people have talked about sustainability in three dimensions: economic, environmental, and social. Obviously, the economic dimension encompasses economic growth. However, the three dimensions are intertwined, so also the environmental and the social dimensions are important to the understanding of SDG8 and to the sustainability of economic growth. Therefore, we also need to consider other SDGs in order to gain true sustainability in all dimensions. For example, increasing economic growth at the expense of the climate (i.e., not considering SDG 13: Take urgent action to combat climate change and its impacts) cannot be sustainable. Hence, the environmental dimension must not be forgotten.

Likewise, increasing economic growth has to be done in the light of SDG 1 (End poverty in all its forms everywhere). Without the consideration of distributional effects and the ensurande that increased prosperity also reduces poverty, the social dimension of sustainability would be forgotten. Hence, when considering SDG 8 and its various targets, we need to keep the other two dimensions also in mind making sure that overall sustainability is promoted. The OECD uses the term inclusive growth to label “economic growth that is distributed fairly across society and creates opportunities for all.” Hence, what counts is not GDP growth as such—wellbeing of the population is also important. Reaping the benefits of economic growth must be accomplished so that everyone benefits from it. Therefore, fairness and equality are two important components that we will discuss in more detail in this paper.

In light of the various targets of SDG 8, naturally many parts of local, national, and international entities play a role, and many different policies are important for attaining sustainable development. While we almost exclusively focus on the potential role of taxation, we keep in mind that taxes are but one policy tool among many. The effects of taxation may be influenced by other measures taken and for certain targets, other policies are preferred to tax policy. The current economic situation, with high inflation, energy crises, and instability caused by war in Ukraine initiated in 2022, make it even more important to secure economic growth, but not at any cost. Hence, we discuss SDG 8 under the awareness of both the short- and the long-term perspective.

The rest of the paper is organized as follows. Section 2 gives a brief overview of SDG 8 and the links to our basic values of sustainability and the core principles of taxation. In Section 3, we discuss international tax policies on the OECD level, their connection to fairness and how these policies relate to the core principles. In the end of Section 3 we analyze how the EU implements the OECD policies in terms of fairness and how the policies relate to the core principles. Section 4 discusses examples at the Swedish national level, and Section 5 summarizes and concludes.

SDG 8 reads “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.” This goal is broad and covers many aspects. Not only should we promote economic growth, but the growth should be “sustained, inclusive and sustainable.” Moreover, the aim is that everyone should work under decent circumstances.

The crude definition of economic growth is an increase in GDP or GDP per capita. To incorporate sustainability in the growth concept, OECD has defined inclusive growth as “economic growth that is distributed fairly across society and creates opportunities for all.” Hence, it is not sufficient that the economy grows, but the growth must benefit all, including the least well off in society. These are crucial issues for the role of taxation in promoting inclusive growth.

Hence, growth should not be promoted for its own sake but should be used as a means by which people could be lifted out of poverty (in accordance with SDG 1). Growth creates resources that could be redistributed increasing the possibility to ensure education (in accordance with SDG 4) and gender equality (in accordance with SDG 5). To accomplish this, tax policy could play an important role. The inclusive growth as defined by the OECD then also needs to adhere to decent work conditions so as not to cause more inequalities or long-term negative effects, either for individuals, or for society at large.

Moreover, not only is pure GDP per capita of concern, even if distributed fairly. The production causing the growth must also be reached in a sustainable way (in accordance with SDG 12). The terms for production are heavily affected by the possibility to use energy, preferably sustainable and clean energy (in accordance with SDG 7). The energy crisis starting in 2022 could make this a challenging task and short-term solutions that are not particularly sustainable may be tempting. Tax policy could be used as one means of several to steer production in a long-run sustainable direction.

According to SDG 8, one aim is to reduce unemployment, an area where there is also a natural role for tax policy. By altering taxes, one could reduce or increase tax wedges and affect both supply and demand of labor. However, tax policy is just one tool that could be used for this purpose. The World Bank, among others, warns about a global recession in 2023,⁴ and tax cuts that could prevent increased unemployment would probably increase the already high inflation rates further, so a general expansionary fiscal policy may not be timely in such situations. However, certain groups are more vulnerable than others on the labor market and there could still be room for targeted tax policies to promote employment also at this specific time. Moreover, if not taking working conditions and the other basic values of the SDGs into account, crude unemployment figures give little information of the sustainability of the labor market in a given economy. This implies that the basic value of local coherence is important also for understanding SDG 8 and the potential policy tools available to reach this goal. This will be further discussed below in section 2.2.3.

SDG8 comprises several targets, some of which are highly relevant in the analysis of the role of taxation and some we will not discuss at all, as taxation may not be an effective policy tool for reaching them. Below we list and shortly discuss the targets we find most relevant from a tax perspective.

As discussed above, the underlying basic values of the SDGs are equality/equity, environmental protection, and coherence. These values can be connected to the ongoing policy work both at the OECD and EU level as they partially underly the argument of fairness, which is used in several policy documents and as an argument for introducing substantial changes in international and EU tax law. One such example is the changes suggested for taxing the digital economy within the Base Erosion Profit Shifting (BEPS) project, initiated by the G20 in June 2012.⁹ The BEPS project covers 15 different sub-projects referred to as Actions.¹⁰ Action 1 concerns the challenges arising from digitalization and is the most interesting for our analysis, although also other Actions are important for reaching SDG 8. In the first reports on the BEPS project and Action 1, from 2013, the concept of fairness is used to describe the tax environment and compliance is pointed out as a necessity for reaching a fair tax environment. Fairness in this sense is thus an objective for the whole tax system. In other policy documents within the same project, fairness is used as an argument for changing the principles for taxing digital business models. This is carried out within the work on Action 1 and how the tax systems can meet the challenges posed by digitalization as part of the BEPS project. The basis for this argument can be found in the agreement from the G20 in establishing the BEPS project in St Petersburg on September 5—6, 2013:

“In a context of severe fiscal consolidation and social hardship, in many countries ensuring that all taxpayers pay their fair share of taxes is more than ever a priority. Tax avoidance, harmful practices, and aggressive tax planning have to be tackled. The growth of the digital economy also poses challenges for international taxation. We fully endorse the ambitious and comprehensive Action Plan—originated in the OECD—aimed at addressing base erosion and profit shifting with mechanism to enrich the Plan as appropriate. We welcome the establishment of the G20/OECD BEPS project, and we encourage all interested countries to participate. Profits should be taxed where economic activities deriving the profits are performed and where value is created ….”¹¹

The development of the policy work on Action 1 and the taxation of the digital economy have been discussed since 2013 in the Inclusive Framework, consisting not only of the OECD Member States, but also other states: in total, more than 140 countries and jurisdictions.¹² The policy work within the Inclusive Framework and Action 1 of the BEPS project has led to suggestions of changes in the international tax law. Principles for sharing the tax base between resident and source states are adapted by using the concept of market jurisdictions leading to taxation in the jurisdictions where value is created as originally described in the suggestions for Pillar One and Pillar Two.¹³ Hence, fairness in this sense is used as an argument for creating a shift in which income is taxed, benefiting jurisdictions with a strong base for consumption and with access to technology for participation in the digital economy. One key aspect of the fairness of this shift is whether the agreement and the process leading to it are considered legitimate.

Work within the OECD is an example of following the core principle of international cooperation, leading to increased coherence, which is one of the basic values underlying the SDGs. However, as Rendahl has discussed in previous research, there is also an increased risk for parallel legal developments since policies need to be implemented in tax legislation in all the jurisdictions affected, and they need to be interpreted and applied in all these jurisdictions in a similar manner to avoid differences creating causes for double taxation and double non-taxation (Rendahl 2019, 376–377, Rendahl 2015, 84). This problem occurs both for direct and indirect taxes and emphasizes the need for understanding coherence not only at the global level but also at the local level. Tax law is increasingly discussed and agreed upon within different forms of regional or international cooperation (one of the core principles discussed in Section 2).

On July 1, 2021, the OECD published a statement on a Two-Pillar Solution to meet the challenges arising from digitalization of the economy. These challenges can be described as how the national tax systems try to cope with the globalized economy, in which assets easily cross borders and national control to avoid abuse of law and aggressive tax planning are challenged by both individuals’ and corporations’ behavior and by the inherent differences between states and their tax systems. In this statement the Inclusive Framework (134 countries at the time) agreed upon how to adapt the international taxation of the digital economy.¹⁴ In short, Pillar One concerns allocating taxable income to the market jurisdiction based on the notion that value is created in that market. The OECD summarizes the aim of Pillar One as being “… to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs, which are the winners of globalization.”¹⁵ Pillar Two introduces a global minimum corporate tax which can be used by countries to protect their tax bases. It thereby aims to set multilateral limits for tax competition.¹⁶

The main references to fairness in the two blueprints underlying the statement on accepting a Two-Pillar approach concern arguments related to companies paying their fair share and doing so in the right place.¹⁷ This also includes fair and reasonable apportionment between jurisdictions where business has physical operations and where customers are located for cloud computing service providers, benefiting from information collected about their customers.¹⁸ For the accounting of dividend income and gains or losses and their exemption from the taxable amount, as introduced in Pillar One, the fair value method should be used; the same method is used in Pillar Two for holding companies or other investment entities in MNE groups.¹⁹ The fair value method is suggested for several other issues described in greater detail in Pillar Two, but not discussed further in this article.²⁰

SDG 8 and its underlying targets focus on ensuring inclusive and sustainable economic growth and decent work for all. Taxation needs to meet these values, which may be a challenge especially in the digital economy. The digital economy is an integral part of the economy at large, and creating tax policies causing differences between digital and traditional business models may create inequalities, especially since the transformation of traditional business models also includes digitalization. The changes in the international taxation of digital business models affect the means for jurisdictions to ensure taxation at the right place. Hence, the right place for taxation may differ depending on whether the jurisdiction is a developing country or not and whether it has a large group of consumers using digital media for consumption. Thus, how information is collected and from which jurisdiction information about users of digital media is gathered may affect taxation. Based on the current work within the Inclusive Framework, decisions have been made as to the fair place of taxation, introducing the market jurisdiction as a new player between the traditional source and resident-based principles for allocating the right to tax income.

As a result of Pillar Two, the EU suggested a new directive, introducing a minimum tax rate for larger multinational companies of 15 per cent.^{21 22} The main points of the directive follow the OECD-suggested Two-Pillar reform. It is also based on accounting measures referring to using a fair value and the fair market value. One rationale, from an EU perspective, for introducing a directive is to ensure that the Member States do not implement individual solutions to comply with Pillar Two of the OECD suggestion to introduce a global minimum tax. Such disparities could, according to the Commission, lead to a distortion of fair competition in the internal market.²³ References are made to the OECD work that aims to ensure that multinational companies pay their fair share of tax wherever they operate, and the Council has concluded its support for the BEPS project in this sense.²⁴ The Commission emphasizes the importance of introducing similar measures in the trading partners of the Union, since there otherwise is a risk of distorting both the effectiveness and fairness of the global minimum tax reform.²⁵

At the EU level, the policies on the taxation of the digital economy need not only to meet the challenges described above of the globalization of the economy but also adhere to the objective of ensuring the EU single market. This is a core value of the integration of the Member States’ policies in several legal areas. Hence, at an international level such as the OECD, tax sovereignty has a somewhat different logic compared with states being part of a regional union such as the EU, where they also have agreed upon meeting the borderless integration of principles such as free movement. It affects the understanding of SDG 8 since the EU market then also covers working conditions for individual workers as well as regulation on competition, the free movement of individuals, capital, goods, and services as well as the right to establishment. Taxation is harmonized at various levels where customs is the most harmonized area, followed by the EU VAT whereas the harmonization of income taxes only covers certain aspects even if a consolidated corporate tax base within the EU has been discussed and suggested.

The EU has been active in the BEPS discussions within the OECD but has also in parallel developed its own policies trying to ensure fairness on the internal market. The EU has decided upon a Tax Action Plan that sets out 25 initiatives that will be implemented between 2021 and 2024 to make taxation fairer, simpler, and more adapted to modern technologies.²⁶ The initiatives include measures to reduce tax obstacles and unnecessary administrative burdens for businesses in the Single Market. Hence, their goal is simplification. The aim is to improve the business environment, enhance business competitiveness, and contribute to economic growth. Other initiatives include measures to help Member States to enforce existing tax rules and improve tax compliance, as well as helping them to ensure and secure reliable tax revenues. It also includes assisting the tax authorities at the Member State level to exploit and share data more efficiently to improve the enforcement of tax rules and to combat tax fraud and evasion. Another measure includes increasing taxpayers’ awareness of their rights under EU law and simplifying their obligations and facilitating their compliance. The actions are described from the taxpayers’ perspective with the argument that they serve the dual objective of fighting tax evasion and making taxation simple and easy.²⁷

References to the BEPS project are made as the Commission ensures its support for the global development as discussed within the OECD Inclusive Framework, particularly pointing out the importance of a deep reform of the corporate tax system to support both economic growth and ensuring needed revenues in a fair way. In doing so, taxing rights need to be realigned with value creation and ensuring minimum taxation of business profits.²⁸ The Commission continues by referring to the Treaty of the Functioning of the EU (TFEU) and using its articles to ensure adoption of proposals on taxation, including Article 116 TFEU.²⁹

Values found in the UN SDGs may be held to underly the EU striving for a transition toward a greener and more digital world compatible with the principles of the social market economy. To reach those goals the Commission holds that fair, efficient, and sustainable taxation is central. Hence, EU tax policies should, according to the Commission, ensure that everyone, both individuals and businesses, pays their fair share, while ensuring that businesses and citizens can enjoy the benefits of the Single Market including cross-border work and investment. To create incentives for climate-friendly behavior, the polluter-pays principle should be respected within the EU.³⁰

At first glance, it seems innocuous and evident that everyone should pay their fair share of taxes. However, in an increasingly globalized world it is not trivial, either to judge what the fair share actually is, or to make sure that everyone lives up to the standards. Horizontal equity is an important principle, where those who have the same earnings should have the same tax liability. In a closed economy with a noncomplex and transparent tax system it is relatively easy to achieve this. With few exceptions or special rules, it is relatively easy to verify that the same rules apply to everyone. Moreover, a noncomplex system reduces the possibilities of noncompliance, further strengthening legitimacy and the perception that everyone else pays their fair share. But who is “everyone else” that one is compared with?

For a firm running their business in an international environment, the relevant others are their competitors in the same market, irrespective of which country they formally operate from. They do not want to face higher taxes than their competitors, and if they do, they may indeed find this unfair and therefore try to evade or avoid taxes to reestablish what they perceive as fairness (i.e., horizontal equity among competitors). However, among other issues, it may instead be seen as highly unfair that the firm does not comply with the set-up tax rules. Hence, the two different perspectives on fairness may be contradictory and thereby discredit tax legitimacy (from at least one perspective). To avoid negative effects on the perceived legitimacy of tax law, the transparency in the trade-off between the different forms of equity and equality needs to be accounted for by policy makers and legislators. This is one of the obstacles that has to be overcome in the implemention of the OECD Inclusive Framework and the EU Tax Action Plan, for example.

As stated above in Section 2, economic equity and legal equality are one of the basic values we have identified for sustainable development. This requires fair taxation, which at first sight seems uncontroversial; however, as discussed in Section 3, policies on fair taxation are accepted in principle but need to be incorporated into legislation for effects at national level. In doing so we have to both understand the concept of fairness from an economic and legal point of view and best consider how to improve fairness with legal measures. This task is complex due to the need for local coherence in implementing global policies as, for example, neither employers nor employees necessarily reside and operate in the same country. The differences in tax rules may be abused by both individuals and enterprises operating in more than one country, distorting the notion of fairness as discussed in Section 3.

Many attempts have been made to overcome some of the obstacles that arise when different countries have different tax rules affecting the same kind of people and firms. Examples are discussed in Section 3 from both the OECD and EU, but there are also other examples affecting developing international VAT/GST guidelines as by the OECD or the harmonized EU VAT, however, with differences in implementation and interpretation at the national level in the Member States.³¹

Simple and equal tax rules promote efficiency and growth, but also legitimacy. Equality (across jurisdictions) may sometimes call for special and more complex rules, however. Agenda 2030 and SDG 8 contain objectives for sustainable development that aim at ensuring inclusive and long-term sustainable economic growth where there is room for full and productive employment with decent working conditions. For most people, work or employment is a basic precondition for reasonable living conditions, and with a rapidly growing population, great efforts are required to create new jobs. If this development is to be sustainable, macroeconomic stability and a good investment climate are required, where employment with decent working conditions are key factors. Within the framework of SDG 8, social security systems are identified as central to promote secure individuals, stabilizing the economy in crises and facilitating mobility in the labor market. In this context, social security can be understood in separate ways and in its most basic meaning, this social security is linked to very basic issues such as safety, food, water, and sanitation (SDG 1.3). In the EU context, the issue of poverty may not have been the most central on the political and legal agenda, but social security remains a central institution for creating the sustainable development that the objectives in SDG 8 express. Social protection, a legal term being broader but including what we refer to as social security, needs financing, mainly via the tax system. An efficient collection of tax revenues is thus intimately linked to a society’s ability to redistribute funds to ensure the type of objective that is intended to achieve the social protection referred to in SDG 8. There may be a trade-off between providing generous social protection for all and making incentives work. However, general and generous social services may facilitate entrepreneurship and innovation that, by definition, are risky activities. An economy that wants people to dare to start entrepreneurial and innovative activities fares better if it provides security for those where the innovations do not turn out to be fruitful. On the other hand, to promote effective entrepreneurship, it is important that successful innovations pay off sufficiently well. This could also be an important task for tax policy.

Within the EU, tax policy is not only about securing sustainability, securing the tax base, or ensuring finances for the social security systems in place in the Member States, but also to balance the goals of the internal market. This creates a movement of principles and legislation in between the different legislative levels in the EU, both the EU level and the national level. Then tension between these regulatory levels often results in cases brought before the Court of Justice of the European Union (CJEU), which has the sole right to interpret EU law and its concepts. This is particularly interesting for ensuring decent work as described in SDG 8.

The main challenge for assessments where the regulatory levels sometimes compete is to balance the interest between the market interest of free movement based on equal access to markets with equality as defined in national welfare systems, for example. This is a challenging task and is well described by Scharpf (2010). A recent practical example is provided by the attempts to further harmonize the highly competitive European transport market (Mobility Package 1 from 2020). The initiative was expressly intended to balance the objectives of safety, social fairness, sustainability, and economy for the European road transport system. On the one hand, cheap and efficient transport of goods is central to the functioning of the market but not at the expense of dumping the social conditions for the drivers (EVA 2019). The EU regulation on cabotage had permitted three domestic transport journeys in a host state after an international transport, a “green” initiative intended to prevent empty journeys and save the environment. But an unintentional result of the rules was that haulers systematically could conduct transports in a foreign country just by crossing the border every seven days, making it possible to press transport prices by competing with wages and other working conditions (Thörnquist 2019).

Other behavior in the transport sector have been moving employment to low-cost countries. This can be achieved by posting transport workers from a low-cost country to a host country or by reorganizing and reemploying drivers in a low-cost country after dismissing them in a high-cost country and then renting them out for work in a host country where social costs are higher.³² We know that social costs differ substantially between EU Member States and that the level and use of social security contributions vary substantially. The problem in these kinds of situations is that EU law and free movement rules are used to avoid effects, in these cases cost-related, leading to the critique of dumping and unfair competition. These arguments are related to that of fair share, as discussed in section 3, where this behavior risks jeopardizing certain aspects of conditional cooperation. The fair share argument is also clearly visible in the legal responses of lawmakers and courts. The CJEU has been unwilling to accept arrangements “in order to exploit EU legislation with the sole aim of obtaining an advantage from the differences that exist between the national rules. In particular, such exploitation of that legislation would be likely to have a ‘race to the bottom’ effect on the social security systems of the Member States and perhaps, ultimately, reduce the level of protection offered by those systems.” (C-610/18 AFMB, 69) This way of reasoning is clearly in line with the tensions within SDG 8 and acknowledges the national interest of safeguarding the sustainability of social protection offered by welfare regulation. Similarly, the fair share argument is of central importance in EU tax policy claiming that tax evasion and avoidance pose a major risk to EU member states both undermining the social contract and disrupting fair competition. ³³ The fairness argument is used in two separate ways. EU tax policies must ensure that everyone, from individuals to corporations, pays their fair share. At the same time, EU tax policies must be designed so that businesses and citizens alike can fully reap the benefits of the Single Market, work and invest cross-border, innovate, and create jobs.

Another example from a national perspective is the use of environmental taxes. Such taxes may affect the behaviors of individuals and companies, and at the same time they, at least initially, may increase the tax base. In Sweden, a tax on chemicals in certain electronic products entered into force in 2017.³⁴ The main aim of the tax is to minimize hazardous flame retardants in households. To reach this aim, the tax affects all electronic products containing flame retardants, such as mobile phones, refrigerators, computers, dishwashers, screens, tablets, etc. These products are taxed when sold to consumers in Sweden (if the seller is established in Sweden) or when a registered retailer provides such products to buyers in Sweden. When a consumer purchases such products from other suppliers, such as suppliers not established in Sweden or registered as retailers, the tax does not apply, unless it is purchased as a distance sale and the provider exceeds a threshold of 100,000 SEK during the calendar year. Companies supplying taxable products are liable to pay the tax to the Swedish tax authority. The taxable rate is decided by the weight of the product where it is taxed, at 11 SEK per kilo for heavier products such as refrigerators and 160 SEK per kilo for other electronic products. The maximum taxable amount is 440 SEK per product. The tax is also included in the taxable amount for VAT which means that an additional 25% VAT is added to the taxable amount. Companies liable to pay the tax on chemicals may have a right to a deduction of 50% and up to 90% of the taxable amount if it can show that the products do not contain hazardous flame retardants. The deduction system has been criticized for being too complicated and not efficient enough to affect which flame retardants are used in electronic products. It may be more cost-effective for companies to pay the full tax rather than claiming the deduction they are entitled to since it is too costly to provide the required documentation. Hence, the tax aims to reach Target 8.4, i.e., to improve resource efficiency by steering away from harmful products. However, it fails to live up to the core principle of efficient, legitimate, and nondiscriminatory taxation. The application of the tax depends on the location of the seller and whether you buy the products as a consumer or as a company. It is also difficult to ensure and provide evidence to attain deduction, which creates uneven (and unfair) competition. Moreover, the complexity of the tax rule hampers legitimacy, and when companies would rather pay the full tax than claim the deductions after reducing their content of hazardous flame retardants, the tax has completely missed its environmental objective.

In recent years a similar tax has been discussed in Sweden for adding tax on chemicals in clothes. It has been heavily criticized for the same reasons as the tax on chemicals on certain electronic products. An overly complicated deduction system is ineffective in making companies use less dangerous chemicals. In a worst-case scenario, there will be no reduction in use of the chemicals but instead a deteriorated legitimacy of the tax. This would reduce sustainability, both of the tax system and of the environmental dimension.

We have described and discussed some of the general challenges for tax policy aimed at reaching SDG 8: Decent work and economic growth. One important aspect is the notions of fairness discussed in Section 3. It is not controversial that taxes should be fair, but exactly what do we mean by fair taxes? Fairness is a concept with underlying comparisons just as equality and equity. A national tax system that is considered locally fair may be considered highly unfair if it deviates too much from those in countries where individuals and enterprises may locate part of their activities in a global economy. This may call for international harmonization or agreements to reduce differences across countries, such as the measures described as taken by OECD in the BEPS project and the Inclusive Framework. On the other hand, such measures also challenge the tax systems as policies and regulations are issued at different levels. This creates a level of regulatory complexity that affects the basic value of coherence. Coherence in turn affects the basic value of equity and equality based also upon what is perceived as fair and legitimate. Coherence thus affects not only which policies are agreed upon within the OECD and the EU and then implemented at national level, but also how the challenges for the tax systems are perceived and which measures can be used to meet those challenges. One inherent challenge for sustainable tax systems is the dual role of taxes. They should ensure financial stability for individual states, financing their government and authorities, ensuring functioning social security systems, and providing possibilities to adjust how and to which extent corporations and individuals are taxed. However, taxation also provides steering mechanisms to ensure that certain values are met, such as using environmental taxes for reaching environmental goals and progressive income taxes to promote equity. The notion of a fair tax system covers both roles of the tax system. For SDG 8 this duality is at the core of how tax systems can contribute to reaching sustainability goals as well as being sustainable in itself. Decent work conditions require a certain level of social protection for the workers, and at the same time their work constitutes an important tax base. The targets in SDG 8 are also closely linked to other SDGs. This link is reflected in the underlying basic values as identified by Rendahl and Nordblom (2020) and discussed in Section 2.2 above. This means that for achieving economic growth and decent work, policies for working conditions affected by other areas such as environmental taxes depending on where in the production and distribution chain they are implemented. affect the overall achievement of SDG 8.

Although it may be tempting to look merely at today’s situation when we consider how fair taxes should be set, for example, we also need to consider the longer run for a policy to be sustainable and for it to contribute to long-term sustainable growth and decent working conditions. Tax policy that is sustainable also in the longer run should take into consideration the possibility of technological change. Most tax systems of today were not constructed to accommodate the digital economy for example. This implies that much of the digital activities are not taxed in either an efficient or a legitimate way. Policies addressing the digital challenges also do not always cover the full scope of taxation, including all tax bases, but are still based on the argument of fairness. Fairness is, however, more complex if understood in the light of the basic value of equity and equality as found in the SDGs, where, for example, local coherence in understanding the problem and possible measures to deal with that problem affect the possibility to implement the policies in different countries in a coherent manner. Digital activities are even less restricted by national borders, so especially with respect to the digital economy, many new international agreements are met. However, technology develops fast, and there is no guarantee that tax policies concerning today’s digital economy will be well suited for the one a decade ahead. Moreover, with so much focus on the digital economy, we tend to forget that a major part of the world’s economy is still physical and that across the globe most growth and employment are created in relatively small and local enterprises providing physical goods and services. Taxation must thus be suitable for all those firms in order for SDG8 to be accomplished. It is a true challenge to create tax systems that are sufficiently internationally coherent to accommodate MNEs’ activities and at the same time do not impede the growth generated by small local firms. This is a challenge also when it comes to legitimacy and the required local coherence.

A final question is who takes responsibility for the long-term sustainability of tax systems as governments may work toward long-term agendas but set the budgets for the states on a short-term basis? Short-run political goals risk reducing the long-term possibilities to reach the sustainability goals. Discussions for changes in the tax systems also occur on several different levels— international, regional, and national—where goals might be either consistent or conflicting. The questions are complex, covering difficult economic and legal issues at multiple levels. The basic values thus need to be understood in the light of continuity, where responsibility for sustainable tax systems and reaching SDG 8 is far more than checking the box of its underlying targets.